Of the 44 million student loan borrowers, nearly one in five is currently in default on one or more federal student loans. The consequences of federal student loan default—such as wage garnishment, offset of federal benefits and tax refunds (including the Earned Income Tax Credit), and for some borrowers, a federal lawsuit—are devastating. A judgment in a federal lawsuit can threaten a borrower’s home and bank account, and can prevent borrowers from ever getting out of default on their federal student loans, forcing many of these borrowers to experience the harsh consequences of default until they die.
Collection lawsuits are supposed to be the collection method of last resort; however, the use of private debt collection law firms has enabled the government to sue borrowers that it would not otherwise choose to sue. The debt collection industry is plagued with abuses and there are some indications that these abuses may be present in collection suits against federal student loan borrowers.